Serbia’s Vucic Poised to Lead Cabinet With EU, IMF Vows

A woman prepares to cast her ballot at a polling station in Gracanica, a district ruled by Serbia, on March 16, 2014. Photographer: Armend Nimani/AFP via Getty Images

March 16 (Bloomberg) -- Serbs headed to the polls today in
early parliamentary elections designed to install Deputy Prime
Minister Aleksandar Vucic as the head of a government vowing to
spur the economy and win European Union membership by 2020.

Vucic’s Progressive Party, which forced a ballot two years
earlier than scheduled, leads the campaign with 44.6 percent,
compared with 13.8 percent for Premier Ivica Dacic’s Socialist
Party, according to a March 10-11 poll by Belgrade-based Faktor
Plus. The survey has a margin of error of 3 percentage points.

Vucic, who said in 1995 that his country would kill 100
Muslims for every Serb who died, wants his party to win a full
majority in parliament. He now pledges to embrace austerity
measures endorsed by the International Monetary Fund and embark
on talks to make Serbia the third former Yugoslav republic to
join the EU two decades after the bloody Balkan civil wars.

“I am sure we will be able to form a government that will
be able to continue along our European path faster,” President
Tomislav Nikolic, a member of Vucic’s Progressive Party, told
reporters after voting in Belgrade. “Things are clear. This is
a great chance for Serbia.”

Polling stations across the country of 7.2 million people
will close at 8 p.m., with preliminary results expected later in
the evening. Final official election results will be announced
by March 20, according to the Election Commission.

Milosevic Association

Vucic has promised billions of dollars worth of investments
from the United Arab Emirates to create jobs in an economy which
has the same number of active workers and pensioners and where
one in four is without a job. EU accession also promises to
raise living standards and output per capita, which at 36
percent of the EU’s average, is lower than those of the bloc’s
poorest member, Bulgaria, according to Eurostat.

Riding a wave of a growing western-leaning electorate would
give Vucic’s party the strongest lock on power by a single party
since the communist days. Aside from Nikolic in the presidency,
senior party official Jorgovanka Tabakovic is the central bank
governor.

Vucic’s critics fear a tendency to wield a powerful hand
over institutions may give him too much influence in a country
that has received criticism from the EU for weak rule of law and
selective justice.

“Things are not black and white,” Sonja Licht, an analyst
at the Belgrade Fund for Political Excellence, said today by
phone. “A great dominance of a single party in a relatively
young democracy like Serbia can be dangerous, since they want to
control all segments.”

EU Turnaround

Once a prominent member of the Radical Party led by
Vojislav Seselj, who is now awaiting a Hague court verdict on
charges of war crimes and crimes against humanity, Vucic is
trying to shake off associations with his past relations with
former strongman Slobodan Milosevic and his cronies.

He supports membership in the EU, a turnaround from the
years when he and political allies resisted EU demands to give
up suspected war criminals, renounce claims on Kosovo, a former
province that declared independence, and bring the judiciary
into line with EU norms.

The elections are “all very much positive for Serbian
credit,” Abbas Ameli-Renani, a strategist at Royal Bank of
Scotland Group Plc, said by e-mail on March 14. “In my view,
all the positive news is already priced at this stage and I
don’t expect any further relative tightening of Serbian yields
on the back of a positive election outcome.”

Yields on the 2021 dollar bond rose 3 basis points, or 0.03
percentage point, to 5.57 percent by 2:44 p.m. on March 14 in
Belgrade, data compiled by Bloomberg show.

Anti-Corruption Drive

Supporters also say Vucic is committed to fighting
corruption that has left Serbia behind all its ex-Yugoslav
partners and neighboring EU members Romania and Hungary in
Berlin-based Transparency International’s 2013 corruption
perception rankings.

Dragoljub Jovicevic, a 54-year-old lawyer from Belgrade,
said he is casting his vote for Vucic and the Progressives
because they will be “decisive” in dealing with rampant graft.

While Vucic has promised to form a cabinet with broad
support to tackle unpopular measures, “we are more likely to
end up with a narrow coalition,” said Naz Masraff, an analyst
at political-risk assessor Eurasia Group in London, in a March 4
note. Vucic has yet to prove his commitment to reform is
genuine, Masraff said.

Public Debt

The Progressives have “talked the talk of economic
reforms” but “done little to walk the walk,” Masraff said.

Serbia’s new government will inherit an economy that the
central bank expects to grow 1 percent this year. Serbia’s 2014
budget targets a fiscal deficit of 7.1 percent of gross domestic
product. It will need to narrow the gap further and cut public
debt by 2016 to meet commitments to the IMF, which suspended a
loan in 2012.

The next government needs to focus on fixing its pension
system and labor market, overhauling failing state-owned
enterprises and cleaning up public finances, unpopular measures
that if not done quickly may turn public opinion against it.

“If they start with economic, social and institutional
reforms they have a chance to last longer,” Licht said. “If
not, the citizens will punish them.”